INCORPORATION OF LLC
A limited liability company (LLC) is the most popular and excellent vehicle to use for entrepreneurs doing business within UAE and globally. A Limited Liability Company can be formed by a minimum of two and a maximum of fifty persons whose liability is limited to their shares in the capital of the Company.
Most Companies with foreign investors have opted for this Limited Liability Company, due to the fact that this is the only option which will give maximum legal ownership i.e. 49% to the foreign investors for a trading license issued by the governments of respective emirates, 51% participation in the capital of the Company by one or more UAE nationals is the general requirement for the Limited Liability Companies. This 51% of the equity must be held at all times by one or more UAE nationals.
Therefore the normal shareholding pattern for an LLC is: Local UAE National (s) – 51% Foreign Shareholder (s) – 49% While foreign equity in the company cannot exceed 49%, profit and loss distribution can be mutually agreed. Responsibility for the management of a Limited Liability Company can be vested in the foreign or national partners or a third party. This kind of companies are recognised as offering a most suitable structure for entrepreneurs interested in developing a long term relationship in the local UAE market. Companies Law stipulates that an LLC may engage in any lawful activity except for insurance, banking and the investment of money for others where a Public Joint Stock Company is required.
Other commercial structures regulated by UAE company law are Sole Proprietorship, Branch of a Foreign Company, Representative office of a Foreign Company, General Partnerships, Simple Limited Partnerships, Joint Participation, Public Joint Stock Company, Private Joint Stock Company and Partnerships Limited with Shares, most of which, except for the Sole Proprietorship, Branch of a Foreign Company, Representative office of a Foreign Company, Private and Public Joint Stock Companies, are not commonly used.
Following are the salient features of incorporating a UAE LLC which should help you decide whether this structure is the optimum solution to fulfil your local and international business needs.
Features of LLC
In general, incorporating an LLC in some emirates does not require minimum capital as this formal requirement has been abolished in some emirates. Some companies may be subject to minimum capital requirements, dependent on the size, nature and activities of the business. The investors can achieve a strong physical presence in UAE local market though an LLC.
The businesspersons can obtain a Trade License from the respective governments to trade locally and internationally through an LLC. There are few restrictions on the activities of an LLC, and it is possible to obtain a license for most of the activities with the exception of banking, insurance and investment activities. We make it very easy for our clients to open corporate bank accounts following LLC set up. We work with leading local banks as well as internationally-recognised banks to provide corporate bank account services. Incorporating an LLC is bit difficult.
LLC company requires a minimum 51% shareholding by UAE nationals. We can help you find UAE national (s) to fulfil the statutory requirement. Foreign corporate entities can also hold up to 49% shares of an LLC but it is a pre requirement that the corporate documents of the foreign corporate entity like Memorandum and Articles of Association, Certificate of Incorporation and Board Resolution resolving to hold shares in and LLC and Power of Attorney in favour of the LLC manager must be notarised and legalised in the country of incorporation of the parent company. In addition, these documents must then be legalised at the Ministry of Foreign Affairs in UAE and then translated into Arabic. The said additional requirements make the process of incorporation more complex, take a lot of time and also increase the cost of setting up an LLC